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Apple faces challenges in China and Brazil

While Apple's success in established markets around the world is taken for granted, the company is having a harder time gaining a solid foothold in two large and growing smartphone markets -- China and Brazil. As GigaOM's Erica Ogg notes in a recent post, a Chinese manufacturer and Brazilian mobile carrier are demonstrating that Apple may need to tweak its model for success in emerging markets.

In China, handset maker Xiaomi is following the Apple plan for success quite well. It designs the hardware, uses NVIDIA mobile chipsets and Samsung memory, and lets Foxconn assemble the hardware. Also like Apple, the company waits about a year between introducing new models. Xiaomi sold 7.2 million smartphones in China in 2012 and has plans to sell double that amount in 2013.

By building its smartphone on Android, designing all of the major apps in-house and doing no marketing except on "China's Twitter" Sina Weibo, Xiaomi can charge much less for a smartphone with an excellent user experience. In a market where 70 percent of all smartphones are unlocked and unsubsidized, that lower initial price makes a big difference to users.

Brazil is a totally different matter. Android smartphones and iPhones only make up about 20 percent of the market, since most are manufactured overseas and various taxes make an iPhone close to 30 times more expensive in Brazil than in the US.

Fabricio Bloiso Rocha, CEO of Brazilian carrier Movile, thinks that the iPhone has "the best UX" and is the "best product overall." However, he also mentioned that "for Latin America, to invest there, you have to go Android because price is very important." That's an important factor for Apple to consider when thinking about whether or not to produce a lower-priced iPhone for emerging markets.

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